Regulations
On 21 April 2018, new rules regarding the handling of "group" insolvency proceedings of companies in Germany became effective.
The regulations aimed at better coordination between separate insolvency proceedings, which must be implemented for every company within a group under German insolvency rulings. Prior to the regulations becoming effective, coordination was quite difficult, due to the separate responsibilities of different courts and insolvency administrators.
Amendments to the German Insolvency Act
On 21 April 2018, new rules regarding the handling of “group” insolvency proceedings of companies in Germany become effective.
The regulations aim at better coordination between separate insolvency proceedings which must be implemented for every company within a group under German insolvency rulings. Up to now, coordination was quite difficult, due to separate responsibilities of different courts and insolvency administrators.
Key Points
A binding contract by exchange of email did not arise where parties were simply exploring a potential deal.
Sale by auction is often appropriate where an asset is difficult to value.
Where no differential treatment of creditors, unfair harm requires that a decision does not withstand logical analysis.
The Facts
Investors may, for reasons outside of their control, find themselves with a financially distressed company in their portfolio and possibly in unfamiliar territory. Consequently, it is not just those investors who actively seek out opportunities within the distressed space who should be mindful of the implications of insolvency processes (most commonly administration which can often also be used as part of a wider restructuring).
Key points
Failure to comply with sections 333 and 363 of the Insolvency Act constitutes contempt of court for which a committal order may be obtained.
A trustee in bankruptcy should not usually require permission to apply for a committal order.
Correct procedure for application confirmed by the court.
Key points
Information obtained by compulsion can be shared between officeholders of connected estates (parent/subsidiary)
There must, however, be a possibility that there will be a surplus in the subsidiary estate
The prospect must be real as opposed to fanciful
The facts
Key points
Court reiterated circumstances in which it will sanction a proposed course of action by administrators
Requirement that the course of action be “particularly momentous”
Court sanctioned proposed settlement in the circumstances
The Facts
Key Points
Summary
In May 2017, the German Federal Supreme Court (Bundesgerichtshof), Az. XI ZR 571/15, has given its views for the first time on bridging loans (Überbrückungskredite) and their validity in a restructuring scenario.
Key Points
- Floating charge is valid even where there are no unencumbered assets at the time it is taken
- Crystallisation of prior ranking floating charge does not impact enforceability of second ranking floating charge
The Facts